RNS Number:7739Y
Morgan Sindall PLC
13 February 2001
MORGAN SINDALL PLC
Preliminary results for the year ended 31 December 2000
Morgan Sindall plc, the construction brands group, today announces a sixth
consecutive year of record results.
2000 1999 Increase
Turnover #655m #521m +26%
Pre-tax profits on ordinary activities #15.36m #10.08m +52%
Earnings per share 29.75p 22.17p +34%
Net assets #45.7m #37.9m +20%
Net cash funds #23.5m #22.0m +6%
Proposed final dividend 7.5p 6.0p +25%
Financial
* Strong financial performance - sixth record year despite lower property
profits
* Strong organic growth and improved profitability in all core operational
Divisions
* Strong position for 2001 with a year-end order book of #406m (1999: #
273m)
Operational
* Fit out #229m turnover; #8.7m operating profit (1999: #7.6m)
- Market continues to be healthy
- Wider spectrum of contract size delivered growth in
volume
* Construction #318m turnover; #4.5m operating profit (1999: #3.1m)
- Dramatic growth in margin and profit
- Trend towards more negotiated work
* Affordable housing #108m turnover; #2.7m operating profit in first full
year of ownership
- Affordable housing beginning to show its potential
- Margin increase to 2.5% (+55%) despite continued
investment
- Order book for 2001 of #102m - margins set for
continued growth
John Morgan, Executive Chairman said:
"Our businesses have again demonstrated their ability to consistently grow.
With healthy market conditions spanning all of our Divisions and a sound
financial position, 2001 will be a year of acceleration and pace."
13 February 2001
ENQUIRIES:
Morgan Sindall plc Today: 020 7457 2020
John Morgan, Executive Chairman Thereafter: 020 7307 9200
John Bishop, Finance Director
College Hill Tel: 020 7457 2020
Matthew Smallwood
MORGAN SINDALL PLC
Preliminary results for the year ended 31 December 2000
Chairman's Statement
It is always a pleasure to report on a successful year, 2000 being the sixth
consecutive record performance. More importantly, I believe 2001 can be even
better. The Group entered the year with an order book of #406m, an improvement
of 49% on last year. Our three core business Divisions are stronger from a
management perspective than ever before. With a restructured central
management team in support and increased potential returns from the investment
of our balance sheet we look ahead with confidence.
Financial Results
Turnover in 2000 of #655m is 26% ahead of the previous year and whilst this is
flattered by a full year's turnover from Lovell compared to six months in
1999, the second half Group turnover was still ahead of last year by 22%.
Profit before tax on ongoing businesses increased by 16% to #16.0m despite
reduced contribution from property investment, where one major property
completion originally expected for 2000 is now anticipated this year. The
bottom line result is that profits available to ordinary shareholders are up
41% to #11.2m. The Board is pleased to recommend a further increase in
dividend with a proposed final dividend of 7.5p (1999: 6.0p) to make a total
of l0.5p for the year (1999: 8.5p).
Board Changes
Against a backdrop of good news I am sorry to inform you that Andy Stoddart
our Managing Director will today be resigning due to ill health. His
contribution to the Group over the last six years has been immense and all of
us wish him success in overcoming his health problems and a long and happy
retirement. It is typical of the man that he leaves us with a newly reshaped
and improved structure. Whereas previously all Brands reported to the centre,
this year has seen the creation of three Divisional boards moving more of the
decision-making closer to the operational front. The Divisions are supported
at the centre by Paul Whitmore, who joined us in April 2000 as Commercial
Director, and Jack Lovell and John Bishop who have been with the Group since
its creation in 1994. The three Divisional Managing Directors will now report
to me as Executive Chairman and as such the Board believes the structure needs
no further expansion at this time.
Trading Overview
The Fit Out Division traded well throughout 2000. Changes in procurement
patterns such as partnering, framework agreements and ongoing maintenance
support have demanded greater flexibility and closer co-operation between our
Fit Out Brands. The new divisional structure will assist in ensuring that we
offer the best service to our clients irrespective of historic Brand
boundaries. In addition, I believe that a divisional structure will accelerate
the opportunities of expansion of this business into related areas.
MORGAN SINDALL PLC
Preliminary results for the year ended 31 December 2000
Chairman's statement (cont'd)
The Construction Division is headed by Chris Saxton who, as Managing Director
of Snape, was responsible for transforming that company from losses to a
successful regional Brand with margins of over 3%. All seven Brands are
profitable and have reached varying degrees of success in establishing
themselves as regional forces. The formation of the Division will not only
improve the Brands' individual performances, but enable them to respond better
to national clients and initiatives.
The Affordable Housing Division has undergone intense scrutiny and significant
strengthening since its acquisition in June 1999. I have always been confident
that Lovell's Brand strength and the Morgan Sindall resource and motivation
would be a winning combination. The results for 2000 are a welcome improvement
ahead of expectation. The fact that the improvement has been achieved whilst
investing in new staff and increasing Lovell's forward opportunity levels
augurs well for the future.
Fit Out
It was a lively year for Fit Out. The market sector has been healthy and the
Division was able to generate increased levels of repeat orders from a
customer base that has been carefully nurtured.
The growth of the Fit Out Division continued with a turnover of #229m and
operating profits of #8.7m, a 15.2% profit increase from last year. A
significant proportion of growth came from the major projects team which has
successfully become a leading contender for large projects in London and the
Home Counties. Our newest team, Overbury Special Projects, established to
manage small works, had a good first year and proved an effective way of
consolidating established customer relationships. The Fit Out Division is now
able to offer customers a service from the smallest to largest project that we
believe will enable us to further lock out competitors.
Both Morgan Lovell and Overbury have continued their successful growth in the
southern Home Counties and particularly the Thames Valley, working with a
broad mix of old and new economy customers. Growth outside of London will
continue with Morgan Lovell seeking to establish themselves in the northern
Home Counties with a new Milton Keynes office.
Current order levels show a strong start for the year ahead. The establishment
of a divisional structure gives the Overbury and Morgan Lovell Brands a unique
opportunity to learn from each other's strengths and consequently offer
customers a strong and effective service, regardless of procurement route. It
also gives us a wider base from which to investigate opportunities to expand
the Fit Out Division into new related areas.
MORGAN SINDALL PLC
Preliminary results for the year ended 31 December 2000
Chairman's statement (cont'd)
Construction
In 2000, the Construction Division delivered a record annual turnover of #318m
and a record operating profit of #4.5m up 47% on last year's profit. The
second half result demonstrated a continuing improvement in our business. All
our Construction Brands are profitable, have strong order books for 2001 and
are in a good position to show further growth in the coming year.
Since 1994 seven Brands have been acquired providing a network which now
covers England and Wales. Dramatic organic growth in turnover has been
achieved and the opportunity for future expansion remains as exciting. The
present emphasis however is to lift margins by improving Brand performance and
building lasting relationships with our clients and our supply chain. We will
achieve this by promoting the individual abilities of the profit centre units,
all of which are continually developing a track record in specific areas of
construction.
Collectively, we are also able to pool the resources of our network to respond
to national clients and national initiatives. Our divisional management
structure will facilitate our ability to respond to such market opportunities.
Strong profit centre teams who deliver on promises to clients are the key to
achieving net margins over industry norms. The Morgan Sindall culture of
decentralised management will continue to encourage the enthusiasm and
motivation of our people upon whom our future success depends.
Affordable Housing
Lovell produced very pleasing results in 2000 with turnover of #108m and
operating profit of #2.7m, an increase in margin of 55% to 2.5%. This was
despite considerable continued investment in people, premises and new systems.
The value of new contracts secured in the year was #l56m with an even mix
between partnership housing and open market in line with the business plan.
The Government continues its commitment to increase the provision of social
and affordable housing from which Lovell is ideally positioned to benefit,
particularly in mixed tenure urban regeneration schemes. One such project
secured this year is the #l6m regeneration of the Trowbridge Estate in Hackney
which involves the building over three years of 220 mixed tenure homes. Price
was only one of many factors considered in the award of this project. Other
opportunities for Lovell include Private Finance Initiative housing schemes.
In 2000 eight Pathfinder schemes were announced with a further thirty schemes
expected to be released in 2001.
MORGAN SINDALL PLC
Preliminary results for the year ended 31 December 2000
Chairman's statement (cont'd)
Whilst lead in times are lengthy on these types of project, Lovell entered
2001 with a healthy forward order book significantly ahead of this time last
year. A considerable proportion of this new work was secured under the
principles of Best Value. In addition Lovell is in discussions on a range of
exciting projects where they have been appointed preferred developer and from
which they will secure work for 2002 and beyond.
Investments
In 2000 the return from our property profits and interest was #2.2m (1999 #
3.7m) which was lower than expected due to a delay in the letting of our
office development in Wigmore Street, London. Our refurbishment of offices in
Shepherds Bush which we purchased in 2000 will also be completed shortly and
is already attracting interest from potential tenants.
Whilst we will continue to look for further property opportunities, we have
established a company for investing in PFI projects. This will assist the core
Divisions in pursuing PFI opportunities, and will also become an important
investment vehicle gradually acquiring a quality stream of income through its
holdings in individual project companies.
Primary Medical Property, our joint venture business, which develops and
retains primary care buildings, continues to expand its portfolio and now has
#41m of projects either completed or under construction. This investment has
excellent capital growth potential, provides construction work opportunities
for Group companies and is proving invaluable as a partner when we are dealing
with national Government procurement of medical facilities.
It remains the Group's policy to keep strengthening the balance sheet, as
buyers of construction services increasingly favour companies whose turnover
is sufficiently supported by assets. Our policy has been to invest our
reserves in a mixture of cash and property and to be proactive but
conservative.
Future Prospects
I feel optimistic for the coming year with the three Divisions all in good
shape. Returns from property should be ahead as the delayed 2000 project
completes and this will give us extra income to offset the early costs of
investing in PFI projects, which in the longer term will give us a more steady
income flow. I see that there is both the potential and the determination to
achieve substantial organic growth. This will not preclude us from looking at
further strategic developments but should ensure that we only make moves that
are truly capable of taking the Group up to the next level.
John Morgan
Executive Chairman
MORGAN SINDALL PLC
Preliminary results for the year ended 31 December 2000
Group Profit and Loss Account
for the year ended 31 December 2000 (unaudited)
2000 1999
# #'000s # #'000s
'000s '000s
Turnover
Continuing operations 655,980 519,385
Discontinued operations - 1,900
Less share of joint venture (1,144) (658)
turnover
Group turnover 654,836 520,627
Cost of sales (588,180) (465,584)
Gross profit 66,656 55,043
Administrative expenses (52,804) (44,299)
Other operating income 897 983
Operating profit
Continuing operations 14,749 12,377
Discontinued operations - (650)
Total operating profit 14,749 11,727
Exceptional loss on closure of (684) (3,129)
discontinued business
Share of profits of joint venture - 51
Net interest receivable 1,295 1,426
Profit on ordinary activities 15,360 10,075
before taxation
Tax charge on profit on ordinary (3,964) (1,910)
activities
Profit on ordinary activities after 11,396 8,165
taxation
Dividends on equity and non-equity (4,163) (3,439)
shares
Retained profit for the year 7,233 4,726
Earnings per ordinary share 29.75p 22.17p
Diluted earnings per ordinary share 28.58p 21.34p
MORGAN SINDALL PLC
Preliminary results for the year ended 31 December 2000
Group Balance Sheet
at 31 December 2000 (unaudited)
2000 1999
#'000s #'000s #'000s #'000s
Fixed Assets
Intangible assets 11,218 11,768
Tangible assets 11,865 12,637
Share of joint venture gross 17,929 13,697
assets
Share of joint venture gross (16,840) (12,904)
liabilities
Investment in joint venture 1,089 793
Investment in own shares 1,245 1,170
25,417 26,368
Current Assets
Stocks 35,355 24,812
Debtors 117,964 88,820
Cash at bank and in hand 23,474 22,042
176,793 135,674
Creditors: amounts falling due (156,510) (124,113)
within one year
Net current assets 20,283 11,561
Net assets 45,700 37,929
Capital and reserves
Called up share capital 5,686 6,714
Share premium account 13,064 11,794
Revaluation reserve 4,259 3,963
Profit and loss account 22,691 15,458
Total shareholders' funds 45,700 37,929
Shareholders' funds are
attributable to:
Equity shareholders' funds 41,907 33,076
Non-equity shareholders' funds 3,793 4,853
45,700 37,929
MORGAN SINDALL PLC
Preliminary results for the year ended 31 December 2000
Group Cash Flow Statement
for the year ended 31 December 2000 (unaudited)
2000 1999
#'000s #'000s
Net cash inflow from operating activities 8,211 12,648
Returns on investments and servicing of finance
Interest received 1,411 1,494
Interest paid (615) (395)
Dividends paid to preference shareholders (253) (275)
543 824
Taxation
Corporation tax paid (2,563) (2,191)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (2,288) (3,286)
Receipts from sale of tangible fixed assets 8 778
Payments to acquire fixed asset investments (155) (480)
(2,435) (2,988)
Acquisitions and disposals
Repayment of purchase consideration 750 -
Purchase of subsidiary undertakings - (20,689)
Net cash acquired with subsidiary undertakings - 9
750 (20,680)
Equity dividends paid (3,316) (2,427)
Net cash inflow/(outflow) before financing 1,190 (14,814)
Financing
Issue of shares, net of expenses 242 8,470
Net cash inflow from financing activities 242 8,470
Increase/(decrease) in cash 1,432 (6,344)
MORGAN SINDALL PLC
Preliminary results for the year ended 31 December 2000
Statement of Total Recognised Gains and Losses
for the year ended 31 December 2000 (unaudited)
2000 1999
#'000s #'000s
Profit for the financial year before dividends 11,396 8,165
Share of joint venture's surplus on revaluation of investment 296 558
property
Surplus on revaluation of investment property - 925
Total recognised gains and losses 11,692 9,648
Note of Historical Cost Profits and Losses
for the year ended 31 December 2000 (unaudited)
2000 1999
#'000s #'000s
Profit on ordinary activities before taxation 15,360 10,075
Realisation of property valuation gains of prior years - 140
Difference between the historical cost depreciation charge and
the actual
depreciation charge for the year calculated on the revalued 73 6
amount
Historical cost profit on ordinary activities before taxation 15,433 10,221
Historical cost profit on ordinary activities
after taxation and dividends 7,306 4,872
MORGAN SINDALL PLC
Preliminary results for the year ended 31 December 2000
Combined Statement of Movements in Reserves and Shareholders' Funds
for the year ended 31 December 2000 (unaudited)
2000 1999
Share Revalua- Profit Share- Share-
premium tion and loss Total Share holders' holders'
account reserve account reserves capital funds funds
Group #'000s #'000s #'000s #'000s #'000s #'000s #'000s
Balance at 11,794 3,963 15,458 31,215 6,714 37,929 23,182
1 January
Retained - - 7,233 7,233 - 7,233 4,726
profit for
year
New shares - - - - - - 8,151
issued
Converted 1,038 - - 1,038 (1,038) - -
preference
shares
Options 232 - - 232 10 242 319
exercised
Goodwill - - - - - - 68
realised
on
discontinued
operation
Surplus on - 296 - 296 - 296 1,483
revaluation
Balance at 13,064 4,259 22,691 40,014 5,686 45,700 37,929
31 December
Included within the profit and loss account balance at 31 December 2000 is an
amount for unrealised goodwill totalling #7,034,000 (1999: #7,034,000).
MORGAN SINDALL PLC
Preliminary results for the year ended 31 December 2000
Notes (Unaudited)
1. Analysis of turnover, operating profit and net assets
2000 1999
Profits/ Net Profits/ Net
Turnover (losses) assets Turnover (losses) assets
#'000s #'000s #'000s #'000s #'000s #'000s
Construction 317,605 4,542 (2,366) 274,516 3,097 (684)
Fit out 229,350 8,716 (13,817) 174,146 7,564 (4,427)
Affordable housing 107,709 2,715 16,879 65,065 1,057 8,546
Investments 172 892 22,487 5,000 2,235 14,866
Group activities - (2,116) (957) - (1,576)(4,190)
Continuing operation 654,836 14,749 22,226 518,727 12,377 14,111
Discontinued - - - 1,900 (650) 1,776
operations
654,836 14,749 22,226 520,627 11,727 15,887
Net cash balances 23,474 22,042
Net assets 45,700 37,929
Segmental net assets are stated after deducting interest bearing net cash
balances. All activities are carried out in the United Kingdom and Channel
Islands.
2. Tax charge on profit on ordinary activities
2000 1999
#'000s #'000s
Corporation tax payable at 30% (1999: 30.25%) 4,073 3,000
Under/(over) provision in prior years 96 (143)
Share of tax of joint venture - -
Tax on exceptional loss (205) (947)
3,964 1,910
The tax charge for the year is lower than the standard rate due to the
availability of tax losses brought forward.
3. Dividends on equity and non-equity shares
2000 1999
#'000s #'000s
Non-equity dividends on preference shares
Paid 197 219
Accrued 46 56
243 275
Equity dividends on ordinary shares
Interim paid 3.00p (1999: 2.50p) 1,113 929
Final proposed 7.50p (1999: 6.00p) 2,839 2,235
3,972 3,164
Total dividends 4,215 3,439
Dividends on shares held in trust relating to the Long Term (52) -
Incentive Plan
4,163 3,439
The proposed final dividend will be paid on 12 April 2001 to shareholders on
the register at 9 March 2001. The ex-dividend date is 7 March 2001.
4. Earnings per ordinary share
The calculation of the earnings per share is based on the weighted average
number of 37,494,000 (1999: 35,591,000) ordinary shares in issue during the
year and on the profits for the year attributable to ordinary shareholders of
#11,153,000 (1999: #7,890,000).
In calculating the diluted earnings per share, earnings are adjusted for the
preference dividend of #243,000 (1999: #275,000) making adjusted earnings of #
11,396,000 (1999: #8,165,000). The weighted average number of ordinary shares
are adjusted for the dilutive effect of the convertible preference shares by
1,517,000 (1999: 1,941,000) and share options by 554,000 (1999: 722,000) and
contingent Long Term Incentive Plan shares by 290,000 (1999: nil) giving an
adjusted number of ordinary shares of 39,855,000 (1999: 38,254,000).
5. Reconciliation of operating profit to net cash inflow from operating
activities
2000 1999
#'000s #'000s
Operating profit 14,749 11,727
Depreciation of tangible fixed assets 2,082 1,660
Amortisation of goodwill 650 379
(Profit)/loss on sale of fixed assets (360) 28
Increase in stocks and work in progress (10,044) (242)
Increase in debtors (28,564) (8,177)
Increase in creditors 30,382 10,334
Exceptional loss (684) (3,061)
Net cash inflow from operating activities 8,211 12,648
6. Reconciliation and analysis of net cash flow to movement in net cash
1999 Cash flow 2000
#'000s #'000s #'000s
Cash at bank and in hand 22,042 1,432 23,474
7. Accounting Policies
This announcement is prepared on the basis of accounting policies as stated in
the financial statements for the year ended 31 December 1999.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2000 and 1999. No accounts
for the Company or its subsidiaries in respect of the year ended 31 December
2000 have been delivered to the Registrar of Companies, nor have the auditors
of the Company or its subsidiaries made a report under Section 236 of the
Companies Act 1985 in respect of any accounts for that financial year.
The statutory accounts for the year ended 31 December 2000 will be finalised
on the basis of the financial information presented by the directors in this
preliminary announcement and will be posted to shareholders by 2 March 2001
and delivered to the Registrar of Companies following the Company's Annual
General Meeting.
Full accounts for the Group for the year ended 31 December 1999 have been
delivered to the Registrar of Companies and contain an unqualified audit
report, and did not contain a statement under Section 237 (2) or (3) of the
Companies Act 1985.
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